You'll Never Guess Harley Davidson's New Business Line (Hint: It's Not a New … – Motley Fool

27 February 2016 | 6:05 pm

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Riding motorcycles and drinking isn’t usually the image bike makers want to conjure, but one Harley-Davidson dealership is moving into a space where it can manage a brew pub. Image source: Motor City Harley-Davidson. Screen cap by author screen of YouTube video announcing new site.

Is a Harley-Davidson (NYSE:HOG) brew pub a smart marketing decision by the motorcycle maker? While brand extensions can be an effective way to incrementally increase revenues because they expand the business into new markets they were not already targeting, it only really works when they link naturally with the existing core brand.

Harley’s partnership with Ford for a limited-edition F-150 pickup truck was a smart blending of two American-made brands that complemented each other’s strengths, even though it only ever made up 1% to 2% of Ford’s F-150 sales. Harley’s cake decorating kits, on the other hand, not so much.

And it’s not clear that a corporate blending of drinking and motorcycle riding leans more toward the pickup truck marketing venture than to being a Martha Stewart wannabe.

Certainly, Harley-Davidson needs to do something to boost revenues. Its full year earning released a couple of weeks ago showed the big bike maker’s sales were still in decline in the U.S., its biggest market, and profits were getting slashed. Revenues were down 2% in the fourth quarter and more than 4.5% across all of 2015, though part of that was due to the effects of foreign currency exchange rates.

Yet it can’t be denied lower sales here at home are hurting. U.S. motorcycle sales were down 4% for the quarter and almost 6% for the year. Finding other sources of revenue to supplement slumping bike sales will at least soften the blow.

One smart way Harley is doing it is through clothing sales, specifically a new line of Harley-Davidson branded denim jeans through its Harley-Davidson MotorClothes Collection. That’s the sort of brand extension that can work.

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